Treasury Secretary Henry Paulson said Sunday that foreign banks will be able to unload bad financial assets under a $700 billion U.S. proposal aimed at restoring order during a devastating financial crisis.

"Yes, and they should. Because ... if a financial institution has business operations in the United States, hires people in the United States, if they are clogged with illiquid assets, they have the same impact on the American people as any other institution," Paulson said on ABC television's "This Week with George Stephanopolous."

That last highlighted part "if they are clogged with illiquid assets", presumably means illiquid assets of any kind from any part of the globe. It could be mortgage-backed securities based on real estate in Portugal.

So now Paulson is proposing to vacuum up all the crap paper in the world. You can be damn sure that foreign banks will adjust their books so that they can shovel as much junk as possible into the "business operations in the United States" tent. Who's going to check their books if they are headquartered abroad?